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Financial planning and analysis (FP&A) is evolving into a new field affecting departments and organizations across the board. FP&A is essential to an organization's financial management. The FP&A function includes planning, forecasting, financial analysis, and performance management. To improve their financial performance and make data-driven decisions, organizations have become increasingly reliant on the FP&A function.
In recent years, changes in the technology and business environment have impacted the FP&A landscape. This blog aims to explore 2023's top trends in financial planning and their impact on the future.
FP&A is driven by data. Financial data like revenue, expenses, and profitability have traditionally been the focus of finance. The advent of new technologies and the availability of a vast array of data has increased the number of data sources available to FP&A. This has enabled it to encompass a broader range of data sources. These data sources include non-financial information, such as customer information, social media information, and supply chain information. Due to these factors, it is becoming increasingly essential in strategic decision-making to collect, analyze, and interpret data from multiple sources.
Artificial intelligence (AI) and machine learning are rapidly transforming the field of FP&A. By analyzing vast amounts of data, these technologies can identify patterns and trends that humans would not be able to detect. Using historical data and market trends, they can also predict financial performance.
According to a recent Business Application Research Center (BARC), study, predictive planning technology has increased nearly sevenfold in two years, from 4% in 2020 to 27% in 2022. On the technical front, AI is mature, stable, and ready to support the finance organization. CFOs now have access to the sophisticated data and insights that investors and business leaders demand. During this period of continued uncertainty, AI investment can help investors gain confidence, be decisive, and make more accurate forecasts.
You can also check out our webinar FP & A Trends – 2023
The term RegTech refers to regulation technology. Financial technology (FinTech) offers organizations an easy way to manage an ever-increasing number of regulatory requirements.
RegTech provides companies with customizable solutions for simplifying compliance processes, reducing costs, and improving operational efficiency.
A variety of benefits can be derived from RegTech for businesses. As a result, they can comply with government regulations efficiently.
Instead of spending time manually managing compliance processes, businesses can focus on strategic initiatives rather than costs related to non-compliance.
2023 will likely be marked by growing technology regulation and associated solutions.
A traditional budgeting process involves creating an annual budget and sticking to it. The rapidly changing business environment makes this approach less effective. As a result, rolling forecasts are becoming more popular due to new data and the changing business environment. As a result, organizations are able to respond more quickly to market changes.
The process of scenario planning involves creating multiple forecasts. As a result, organizations can make more informed decisions. A growing portion of the FP&A function is scenario planning due to increased business uncertainty.
Cloud-based FP&A solutions are growing in popularity. Software on the cloud is more flexible, scalable, and cost-effective than on-premise solutions. Additionally, cloud-based solutions make it easier for analysts to collaborate and make decisions based on real-time data.
FP&A is increasingly relying on data visualization. Analysts can make informed decisions by identifying trends and patterns in data through effective data visualization. Organizations invest in tools and technologies to create impactful and meaningful data visualizations.
FP&A is no longer a standalone function. To become more data-driven, FP&A functions are increasingly integrated with marketing, sales, and operations. Organizations can make more informed decisions with this integration.
2023 will see an increasing emphasis on ESG reporting for businesses. An organization's ESG report provides transparency and accountability by detailing the impact of its activities on the environment, society, and governance.
The financial sector looks set for an exciting year in 2023, thanks to the increased adoption of AI, machine learning, and cloud-based services.
A stronger focus on regulation is also expected to improve consumer safety, investor confidence, primary data analysis & automation advancements, and financial technology.
Several financial institutions are also leveraging technology to reduce costs, such as translation management. A growing number of financial institutions are now relying on AI solutions to translate documents as a cost-effective way of maintaining regulatory compliance.
FP&A is evolving rapidly to meet the requirements of a rapidly changing business environment. FP&A focuses on data-driven decision-making, automation, AI, cloud-based solutions, scenario planning, data visualization, and automating processes. With organizations investing in these areas, the FP&A function will become increasingly important for driving business performance.
Financial planning is not just limited to knowing the FP&A Trends, there are many more things that are regularly impending in the industry. So, join the online webinar on myCPE and attend CE/CPD/CPE courses for CFP. PFP, CPA professionals on Financial Planning to learn about the Top 2023 Trends impacting FP&A, identify which trends could affect your business and Finance team, and understand their long-term impacts on your business.
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In 2023, financial analysts will need knowledge of data analysis, financial modeling, and collaboration and communication skills. The field of finance and accounting will also require financial analysts to be familiar with new technologies, such as AI and machine learning.
FP&A trends can be prepared by investing in new technologies and software that support real-time financial reporting, AI, and machine learning. By breaking down silos between departments and promoting a holistic view of financial performance, they can foster a culture of collaboration and communication.
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